Interim Budget of India 2014 -15 Highlights and Analysis

We have already done two write-ups on government budgeting, covering (1) Basics of Government Budgeting and (2) Budget Documents. These two articles serve not only for this year, but for many more years, unless a substantial change happens in the budget presentation process. In this post, let’s see and analyse the Interim Budget of India for the period 2014-15. Let’s take this Interim Budget as an example to understand the complex budgeting process and budget terms too.

Interim Budget of India 2014 -15 Highlights

Finance Minister Mr. P.Chidambaram made a brilliant budget speech highlighting the status of Indian economic situation at the time of turbulent world economic situation. Surprisingly, India seems to have done well in many fronts, including Fiscal Deficit and Current Account Deficit. The main area of worry is the declining GDP growth mostly due to a stagnant manufacturing sector.

State of Indian Economy

Deficit

The fiscal deficit for 2013-14 contained at 4.6 percent .

The current account deficit projected to be at USD 45 billion in 2013-14 down from USD 88 billion in 2012-13.

Foreign exchange reserve to grow by USD 15 billion in this Financial Year.

Inflation

WPI inflation down to 5.05 percent and core inflation down to 3.0 percent in January 2014.

Food inflation down to 6.2 percent from a high of 13.8 per cent.

Agriculture

Food grain production estimated for the current year is 263 million tonnes compared to 255.36 million tonnes in 2012-13.

Non Plan Expenditure (Including Subsidies)

The expenditure on subsidies for food, fertilizer & fuel will be 246,472 crore.

115,000 crore has been allocated for food subsidies.

Changes in Tax Rates

The Excise Duty on all goods falling under Chapter 84 & 85 of the Schedule to the Central Excise Tariff Act is reduced from 12 percent to 10 percent for the period upto 30.06.2014.

To give relief to the Automobile Industry, which is registering unprecended negative growth, the excise duty is reduced for the period up to 30.06.2014 as follows: Small Cars, Motorcycle, Scooters – from 12 % to 8% and Commercial Vehicles SUVs – from 30% to 24% Large and Mid-segment Cars – from 27/24% to 24/20%.

To encourage domestic production of mobile handsets, the excise duties for all categories of mobile handsets is restructured. The rates will be 6% with CENVAT credit or 1 percent without CENVAT credit.

To encourage domestic production of soaps and oleo chemicals, the custom duty structure on non-edible grade industrial oils and its fractions, fatty acids and fatty alcohols is rationalized at 7.5 percent.

To encourage domestic production of specified road construction machinery, the exemption from CVD on similar imported machinery is withdrawn.

The current financial year will end on a satisfactory note with the fiscal deficit at 4.6 percent (below the red line of 4.8 percent) and the revenue deficit at 3.3 percent.

Fiscal Deficit in 2014-15 estimated to be 4.1 percent which will be below the target set by new Fiscal Consolidation Path and Revenue Deficit is estimated at 3.0 percent.

The estimate of Plan Expenditure is 555,322 crore. Non Plan expenditure is estimated at `12,07,892 crore.

Interim Budget of India 2014 -15 Analysis

A quick, overall analysis of the budget figures leads the following inferences:

Though Indian growth has declined in 2013-14, by the time the budget is presented (ie Feb 2014), the government along with the efforts of RBI managed to put good numbers on the board. (FD of 4.6% of GDP, reduced CAD, increased Forex, good show in agriculture etc.)

ClearIAS.com provides free IAS online coaching, guidance, strategies, books and online study-materials with a vision that no candidate should be left out of UPSC exam competition due to in-accessibility of expensive IAS classroom coaching. We write simple, easy to understand articles, but always ensure high standards of quality. Rated among the best, emerging online test preparation start ups, Clear IAS also offers for free, the popular Clear IAS android app.